Press Articles and Videos
09 March 2013
Mike Baghdady and ADS Securities Offers Free Arabic Technical Analysis Training Classes in FX and CFD Trading Abu Dhabi, UAE - Sunday 10th March – ADS Securities (ADSS), the Abu Dhabi based brokerage and financial services trading company, today announced that it will be offering free technical analysis training classes in FX and CFD trading in Arabic, for those interested in trading, but have limited experience of the industry. ADSS is working with specialist consultants, the highly respected trading institute, Training Traders, to offer courses in Dubai and Abu Dhabi. The courses are designed for traders based in the UAE and will be led by Mike Baghdady, an award winning veteran of the global financial markets with 33 years of experience in trading and the Founder of Price Behavior Trading . At ADS Securities, we believe in the importance of education, understanding and training first for anyone who wants to engage in FX and commodities markets. For this reason we are offering this special introductory course on analyzing data and markets for Arabic speaking beginner traders, to enable them to make the most of their trading,” The one day courses cover several topics including the common techniques used in Price Behavior Trading, identifying the high probability trades, price points, decision making price, and equally importantly identifying and quantifying risk, and insight into market psychology. The special technical analysis courses run concurrent to other introductory and advanced courses ADSS offers to its potential and existing clients. Mike Baghdady will be conducting these courses himself .The first course will be held on Tuesday the 12th of March in Dubai at the Ritz Carlton, in the DIFC, and the second on Wednesday the 13th March at ADS Securities’ offices in Abu Dhabi. Those wishing to register can do so on ADSS’ website: http://www.ads-securities.com/en/professional-clients/training-academy, via email firstname.lastname@example.org or by calling +971 2 657 9777.
18 January 2013
Join Mike Baghdady's 10 Annual Market Outlook for 2013 For over 35 years, Mike has been providing technical analysis focused on the US equity markets, and the US dollar and the currency markets to traders who use his analysis to plan their trades. Now you can listen as Mike provides a longer-term context for his analysis, and have an opportunity to quiz Mike on his tools , techniques and outlook. In this webinar, Mike offers: • A review of the technical analysis tools he uses to make his trading decisions; • An outlook of where he expects the US equity indexes to be trading in 2013 (will the bull run continue?); • An analysis of where the U.S. dollar is likely to be trading and how this will affect overall currency markets; http://www.trainingtraders.com/2013-annual-otp
12 December 2012
NFA has made it impossible for all but largest of online brokers to survive. GFT, one of the five largest US-based retail FX brokerage firms, has decided to close shop in its own home market (as well as in Japan). GFT posted a notice on its home page stating that it had "made a business decision to move our U.S. retail forex trading accounts to one of our valued partners [editor's note: TD Ameritrade]." GFT earlier this year lost its star research team of Kathy Lien and Boris Schlossberg, who left to start their own FX asset management firm. They do maintain a strong presence in the Far East, recently ranking as the fifth largest online FX firm in Singapore. When the NFA raised minimum capital requirement for FX (and futures) brokers to $20 million, while simultaneously capping leverage at 50x for major currency pairs, it basically made it too expensive for virtually any firm doing less than $50 billion per month in the US market to make money. Further regulations, such as daily customer fund reports now required by US regulators, has made it even more expensive and difficult to operate in the US. While these regulations were meant to protect US retail traders, they have effectively harmed them , reducing competition in the domestic market to just a handful of firms. While GFT is the first serious US firms to close shop domestically, we have seen other global firms abandon their NFA regulation and/or leave the US market, the most recent being FX Club.
12 December 2012
There has been an announcement from the Bank of Korea that it bought 14 tonnes of gold during the month of November but that has so far been the only Central Bank to declare purchases for last month. Others might take a little bit more time but our target of net buying from Central Banks for 2012 of 500+ tonnes seems to be very much achievable. Economic Background Europe
- The Spanish 10-year bond yield closed the week at 5.46 per cent.
- The Italian 10-year bond yield closed the week at 4.53 per cent. It appears that the political risk in Italy has risen with the announcement of Mr. Berlusconi to remain not only in the political arena, but also contemplating to run again for the office of Prime Minister in the election, scheduled for March 2013.
- The European Central Bank left the refinancing rate unchanged at 0.75 per cent, while revising the 2013 growth forecast for the Eurozone to a contraction of 0.3 per cent. The 2012 growth figure has also been revised to show a contraction of 0.5 per cent for the whole year. However, the outlook of the ECB for inflation in 2013 has also been lowered to 1.6 per cent, down from an earlier forecast of 1.9 per cent. The outlook for inflation in the Eurozone for 2014 has also been lowered to 1.4 per cent.
- The Bank of England has left the benchmark interest rate unchanged at 0.5 per cent, while no more additional stimulus for the economy has been forthcoming at the Bank's meeting last week.
- Last Friday was the last trading day for bond holders of Greek debt to submit the papers for the proposed Greek government bond buy-back.
- The estimates from analysts for the Chinese Industrial Production readings are expected to show a rise of 9.8 per cent, year on year, while Retail Sales figures are expected to show a rise of 14.6 per cent. The official figures will be released on Sunday, 9th December.
- The Non-Farm-Payroll (NFP) numbers for the month of November were released at 146,000, which is much better than the median forecast of 90,000. However, the NFP numbers for September and October have been revised downwards. The unemployment rate fell to 7.7 per cent.
- The Congressional Budget Office (CBO) of the US estimates that the US might enter into a recession during the first half of 2013, while the unemployment rate is expected to rise to 9.1 per cent in Q4 of 2013, if the “Fiscal Cliff” is not resolved at the end of 2012. It seems that the ramifications in that case would take a lot of time to filter through into the economy, while uncertainties will take hold rather quickly.
- The meeting of the Federal Open Market Committee (FOMC) on December 11th and 12th will give an answer to the question, if the monthly spending of US$ 45 Billion for the Operation TWIST will be used to buy US Treasury securities instead. The balance sheet of the FED was US$ 869 Billion at the end of 2007 and that could reach US$ 4 Trillion by the end of 2014, which would require a revisiting of potential exit strategies from the FED.
- The Michigan Consumer Sentiment Index for December fell to 74.5, down from 82.7 in November 2012.
- The Indian Rupee finished the week at 54.47 to the US dollar.
04 December 2012
A top government economist has concluded that the high-speed trading firms that have come to dominate the nation’s financial markets are taking significant profits from traditional investors. The chief economist at the Commodity Futures Trading Commission, Andrei Kirilenko, reports in a coming study that high-frequency traders make an average profit of as much as $5.05 each time they go up against small traders buying and selling one of the most widely used financial contracts. The agency has not endorsed Mr. Kirilenko’s findings, which are still being reviewed by peers, and they are already encountering some resistance from academics. But Bart Chilton, one of five C.F.T.C. commissioners, said on Monday that “what the study shows is that high-frequency traders are really the new middleman in exchange trading, and they’re taking some of the cream off the top.” Mr. Kirilenko’s work stands in contrast to several statements from government officials who have expressed uncertainty about whether high-speed traders are earning profits at the expense of ordinary investors. The study comes as a council of the nation’s top financial regulators is showing increasing concern that the accelerating automation and speed of the financial markets may represent a threat both to other investors and to the stability of the financial system. The Financial Stability Oversight Council, an organization formed after the recent financial crisis to deal with systemic risks, took up the issue at a meeting in November that was closed to the public, according to minutes that were released Monday. The gathering of top regulators, including Treasury Secretary Timothy F. Geithner and Ben S. Bernanke, the Federal Reserve chairman, said in its annual report this summer that recent developments “could lead to unintended errors cascading through the financial system.” The C.F.T.C. is a member of the oversight council. The issue of high-frequency trading has generated anxiety among investors in the stock market, where computerized trading first took hold. But the minutes from the oversight council, and the council’s annual report released this year, indicate that top regulators are viewing the automation of trading as a broader concern as high-speed traders move into an array of financial markets, including bond and foreign currency trading. Mr. Kirilenko’s study focused on one corner of the financial markets that the C.F.T.C. oversees, contracts that are settled based on the future value of the Standard & Poor’s 500-stock index. He and his co-authors, professors at Princeton and the University of Washington, chose the contract because it is one of the most heavily traded financial assets in any market and is popular with a broad array of investors. Using previously private data, Mr. Kirilenko’s team found that from August 2010 to August 2012, high-frequency trading firms were able to reliably capture profits by buying and selling futures contracts from several types of traditional investors. The study notes that there are different types of high-frequency traders, some of which are more aggressive in initiating trades and some of which are passive, simply taking the other side of existing offers in the market. The researchers found that more aggressive traders accounted for the largest share of trading volume and made the biggest profits. The most aggressive scored an average profit of $1.92 for every futures contract they traded with big institutional investors, and made an average $3.49 with a smaller, retail investor. Passive traders, on the other hand, saw a small loss on each contract traded with institutional investors, but they made a bigger profit against retail investors, of $5.05 a contract. Large investors can trade thousands of contracts at once to bet on future shifts in the S.& P. 500 index. The average aggressive high-speed trader made a daily profit of $45,267 in a month in 2010 analyzed by the study. Industry profits have been falling, however, as overall stock trading volume has dropped and the race for the latest technological advances has increased costs. Mr. Kirilenko, who is about to leave the C.F.T.C. for an academic position at the Massachusetts Institute of Technology, presented a draft of the paper at a C.F.T.C. conference last week. He said that the markets were a “zero sum game” in which the high-speed profits came at the expense of other traders. Mr. Kirilenko warned that the smaller traders might leave the futures markets if their profits were drained away, opting instead to operate in less transparent markets where high-speed traders would not get in the way. “They will go someplace that’s darker,” Mr. Kirilenko said at the conference. That could destabilize futures markets long used by traders to hedge risk. A spokesman for the C.F.T.C. said the agency had no comment on the study. But the paper was immediately hailed by Mr. Chilton, who is a Democrat and a critic of recent shifts in the markets. Mr. Chilton said that the study would make it easier for regulators “to put forth regulations in a streamlined fashion. It’s a key step in the process and it should fuel-inject the regulatory effort going forward.” Terrence Hendershott, a professor at the University of California, Berkeley, said there was a limit to the importance of Mr. Kirilenko’s work because it focused on profits and did not address the benefits high-speed traders bring. Mr. Hendershott and many other academics have found that the competition between high-speed traders has helped lower the cost of trading for ordinary investors. But Mr. Hendershott said that limited data available to researchers had made it hard to determine whether the benefits outweighed the costs. The speed and complexity of the financial markets jumped onto the agenda of regulators after the so-called flash crash of 2010, when leading stock indexes fell almost 10 percent in less than half an hour, before quickly making up most of the losses. In its first annual report, in 2011, the Financial Stability Oversight Council noted the concerns raised by the flash crash, but not in great detail. This year’s report included a much fuller discussion of the risks posed by the increasing speed and complexity of the financial markets and called for regulators to look for more ways to limit the risks. Regulators have said that devising new rules has been hard, in part because the trading world has become so complex, making it difficult to determine the total effect that all the innovations have had on traditional investors. Mr. Kirilenko said in an interview Monday that his study was intended to address that. “We’re not estimating,” he said. “Our data is excellent.”
04 December 2012
Yesterday I sat in on a conference call with one of the most influential and most involved Washington insiders on US fiscal issues, Erskine Bowles. Mr. Bowles (Democrat) was one of the two chief architects of Pres. Obama’s bi-partisan commission on debt reduction (National Commission on Fiscal Responsibility and Reform) in 2010 along with Alan Simpson (Republican). This commission produced the bi-partisan Simpson-Bowles plan on deficit reduction, which included both increases in revenues and cuts in spending, but was ultimately rejected by the Obama administration. Both Simpson and Bowles are now out of the political arena and therefore speak very candidly, as Bowles did today. Mr. Bowles launched the conference discussing the long term trends in the US, calling deficit and debt trends the main threat to the United States over the long term specifically stating that entitlements are the main cause of deficit trends. He noted that increases in revenue are meaningless without real spending reduction specifically to healthcare. He put a 2/3 chance US avoids full execution of the debt ceiling (either getting a deal done by year-end or the first 10 days of January) and a 1/3 chance of “going over” the fiscal cliff, which would bring about another US recession. He says taxes will go higher and a likely compromise on revenues will be $1.2 trillion over 10 years. What you hear of ups and downs “collapse” and “progress” and fighting is political “theater”. The crux of the issues are understood by the parties. We concur as we have stated for years, that the gravest long term threat to the US is the rising deficit spending driven by unwieldy and unsustainable government transfer programs. The fiscal cliff is truly only the very short term threat. A likely ultimate “deal” will likely end up as some $1.2 trillion in revenue increases and $400 billion in spending cuts for a total $1.6 trillion adjustment, far less than what is necessary, $4 - $5 trillion over ten years). We add to what Bowles stated, asserting that despite a likely lack of change to entitlements, the resolution that comes in the near term (combo of revenue and spending) will be enough to avoid 2013 rating downgrades. Fundamental reform to curb the exponential Other Revenues and Spending Changes, 17%Payroll Tax Cut Expiration, 16%Budget Control Act Automatic Cuts, 11%Other Expiring Provisions, 11%Unemployment Benefits Expiration, 4%Affordable Care Act Tax Increase, 3%Medicare "Doc Fix" Expiration, 2%2001/2004/ 2010 Tax Cuts & AMT Patch Expiration, 36%US: Federal Deficit Reduction in FY2013 growth of entitlements and guarantee their longevity is not a priority and will not be an achievement of this administration. However, fiscal cliff will be avoided, economy will continue recovery, growing around 2% next year, monetary policy will remain loose indefinitely and markets push higher. According to Bowles, the main challenges to the US fiscal situation are: 1) HEALTHCARE a. “Far and away the biggest problem”. The US spends two times as much as any other developed market as both a percent of GDP and on a per capita basis but the results are not commensurate with the expenditures. Accounts for 10% of GDP and 1/3 of US budget and is growing fast. 2) DEFENSE a. US spends more than next 17 countries combined. 3) TAX CODE a. Inefficient and ineffective. Simpson Bowles recommended wiping out “backdoor spending” meaning eliminate deductions and tax credits primarily enjoyed by the wealthier. Broaden base in addition to higher taxes. 4) SOCIAL SECURITY a. President Roosevelt designed program average life expectancy then was 63, today it’s 78. The Simpson-Bowles recommendation was for incremental increases in eligibility with the first increase, by one year, to come 40 years from now. 5) INTEREST PAYMENTS a. $240 Billion/year even at today’s low rates. By 2022 US will spend more than $1 trillion on interest spending Fiscal Cliff “Catastrophic economic effects” if allowed to occur: $7.7 trillion over 10 years, $607 billion in 2013 alone. 2 million new unemployed and rate will go back to 9.0%. We will go over the fiscal cliff if Republicans do not agree to increase taxes. Mr.Obama's proposal: •$350 Billion of healthcare cuts in Obama proposal, but not enough. Need at least $650 B in healthcare alone to slow the rate of growth of healthcare spending. •Nothing in proposal on SS. •Obama proposal does have some additional spending – Bowles says more recommendable is to set up infrastructure bank for additional spending get more bang for your buck. Sticking points as defined by Mr. Bowles between the two parties: 1) REVENUES a. Problem is with the source of the revenue increases. Republicans ok with $800 billion, and prefer to broaden tax case, simplify code, and eliminate loopholes and deductions. Democrats $1.6 trillion by raising taxes on top 2% to 36% and 39.6% in top two tiers. 2) SPENDING CUTS a. Mr. Obama is looking for $4.5 trillion over 10 years but $850 Billion of which comes from drawdown of troops from Middle East. “Not enough”. Mr. Obama’s plan needs $750 billion in more cuts. 3) DEBT CEILING Probabilities for Fiscal Cliff Execution as seen by Bowles: •1/3 Getting deal done •1/3 Technically “go over cliff” but get done in first 10 days of January. Technical issue. If Bush tax cuts expire (worth $3.9 trillion over 10 years), then Republicans can agree to cut taxes in 2013 (rather than agree to increase then in 2012), •1/3 Full execution of fiscal cliff On the European front, news flow came from Spain’s banking bailout and Greece’s debt buyback, Spain formally requested aid not for the full sovereign bailout as hotly awaited for by the market, but for its banking sector, which will come in the form 36.5 billion Euros including 2.5 billion euros for the "bad bank" on December 12. Four nationalized Spanish banks will be the recipients of the funds: 18 billion will go to Bankia 9 billion to CatalunyaBanc, 5 billion to Nova Caixa Galicia; 4.5 billion to Banco de Valencia. Greece’s announcement of its debt buyback is consistent with the ongoing nature of combined European efforts to maintain the integrity of the European Union, with Germany “all-in” on the rescue of Greece, the less costly (to Germany) option that disintegration of the EMU. The change in tone and leniency of the German positioning symbolized by Chancellor Merkel’s travelling to Greece in early October to meet with Samaras for the first time since the crisis erupted.
10 October 2012
Fears on the outlook for global growth got more fuel today, sending US markets lower for the fourth consecutive trading day, after yesterday's publication of the IMF's World Economic Outlook report where the Fund downgraded its global growth outlook for 2012 and 2013. The IMF downwardly revised its growth forecast for China 7.8% from 8.2% y/y, seeing a soft landing in that economy with a gradual pickup in growth driven by recent policy easing. Today, Alcoa's assertion that a Chinese economic slowdown will cut global demand for aluminium fuelled increased fears of a slowing Chinese economy. Rather, Chinese economic expansion of 8.0% down from 9.2% y/y in 2011 and the +10.4% y/y in 2010 is a soft landing, manoeuvred in part by government machinations on the stimulus front. Despite the low probability we assign to a hard landing, fuelling pessimism on that front was data released earlier this month; China showed its 11th straight month of manufacturing decline, dropping to 47.9 from 47.6 in August. A result of this bearish sentiment, at mid-day the MSCI World was 0.7% lower, S&P 500 -0.7%, aluminum -2%, and oil -0.5% to $91.79. Ten-year UST yields fell two basis points to less than 1.69%. We remain more positive on the global growth scenario with China to expand 8.0% y/y in 2012 and global growth expansion of 3.8% and in 2013 to +4.1% y/y. I expect trend appreciation in US equities over the next 12 months fuelled by the Fed's monthly liquidity injections. We view QE3 as bullish for equity markets and consistent with an equity market rally through year-end of another 6.4% from current levels to an S&P 500 target to 1525. This S&P year-end target is consistent with a price-to-earnings ratio of 14.8 by year-end, on par with current PE ratio and consistent with 13.2x next year's consensus estimates. In our view, the Fed's move promotes increased risk-taking and search for higher-yielding instruments.
10 October 2012
Goldman Sachs says there’s gold to be struck in going long the euro against the Aussie dollar, which could prove a ‘trade of the century.’
The euro’s long run average against the Aussie dollar is around A$1.70 compared with the A$1.250 being traded late Wednesday in Sydney. “It’s great for Aussies going on holidays but I’m not sure how long it’s going to last,” he said. Talk of the Australian dollar being a safe haven should be put on ice too. The US investment bank believes it’s at least 20% overvalued against the greenback and vulnerable to a sharp correction amid a slowing domestic economy and downward pressure on commodity prices. “You can make the case now that the Aussie may have peaked out and may be heading south quite substantially,” said Mr Stolper. Goldman’s central expectation is for a gradual weakening over the medium term but if commodity prices fell substantially then a correction as low as US$0.6500 over the medium term could result, Mr Stolper said. The Aussie continues to trade above parity against the greenback and remains near historic highs versus other rivals even after a large fall in iron ore and coal prices. Prices for iron ore, Australia’s biggest export, have recovered to US$117.20 a ton from the three year lows of US$86.70 a ton struck on Sept. 5 but remain well below the US$135.50 a ton traded three months ago. Some of the currency’s ongoing strength is attributed to record central bank buying of Australia’s bonds to capture the high yields offered by the nation’s triple-A securities and to diversify away from the troubled euro zone. But that demand has now likely topped out, stripping away a key support plank, said Mr. Stolper. “It is almost certainly a clear slow down in terms of inflows coming from central banks particularly into the Australian dollar,” he said. And on that safe haven status: “It has become a reserve currency without any doubt but that doesn’t mean it’s a safe haven currency,” Mr. Stolper said.
- Gillian Tan for The Wall Street Journal
10 October 2012
Trades apparently made in error on Tuesday raised questions once again about the complexities of the modern stock market. A spokeswoman for the Financial Industry Regulatory Authority said an unnamed firm was reviewing errant trades to determine whether it would seek to have them canceled Tuesday afternoon. A number of seemingly unrelated stocks–such as those of Web radio firmPandora Media Inc. P -3.53% (P), the U.S.-listed shares of Finnish phone maker NokiaCorp. NOK1V.HE -1.25% (NOK) and real-estate investment trust CYS Investments Inc. CYS -1.86% (CYS)–saw brief price spikes up or down before returning to their original ranges Tuesday morning. A review of a handful of the affected names showed one to four trades, of several hundred shares each, executed at prices well outside the prevailing rate for each stock. At least one exchange-traded fund also appeared to be affected The Financial Select Sector SPDR Fund XLF -0.62% (XLF), a fund tracking financial shares in the Standard & Poor’s 500-stock index, jumped to $16.49 from $16.06 shortly after 10:47 a.m. EST and reverted to the original price shortly afterward, according to FactSet. At least 258 trades in 146 stocks over the course of nearly an hour caused isolated price spikes starting at 10:02 a.m., according to Nanex, a market-data firm. “A firm reported trades to the FINRA/NASDAQ TRF today at prices away from the current market,” the FINRA spokeswoman said in an e-mailed statement, referring to a “trade reporting facility,” the mechanism used for reporting transactions executed off an exchange. Such trading venues, such as “dark pools”–which are privately run stock markets that match up trades electronically–have grown to represent a large share of U.S. equity-market volume. “The firm is reviewing the trades to determine whether corrections or cancellations of the trades are necessary,” the spokeswoman said. She wasn’t immediately able to say how many stocks were affected by the mishap and declined to give the name of the firm investigating the trades. The episode underlines how improved technology has increased traders’ awareness of trading mixups, said Christopher Nagy, a consultant focused on market regulation and operations. “It happens every day, all the time,” Mr. Nagy said. “Most of the time, unless you’re really paying attention to it, it just happens and goes away. Through information and through technology, it’s been highlighted much more than it had in the past.” Meanwhile, a series of high-profile technological mishaps this year have brought the structure of markets under greater public scrutiny. In August, software problems at Knight Capital Group Inc. KCG -2.35% (KCG), one of the country’s largest facilitators of stock trading, caused erratic trading in dozens of stocks and cost the firm $440 million. Since then, smaller incidents of unusual trading action have afflicted energy stocks and, notably, shares of Kraft Foods Group Inc. KRFT +0.88% (KRFT). Market overseers have acknowledged that, while they are working to improve their stock-market oversight and create systems to guard against large-scale trading snafus, individual stocks will likely continue to see erratic activity from time to time. U.S. stock-market operators and brokers last month proposed that exchanges develop a “kill switch” to clamp down on a firm’s trading if its positions grow too large. But Gregg Berman, senior policy adviser for the SEC’s division of trading and markets, said at an industry event last week such measures wouldn’t put an end to the “little blips” that occasionally affect trading. Mr. Berman, a former hedge-fund manager, said at the event that preventing such smaller issues would be extremely complex.
10 October 2012
Last week’s FX trade of the week to sell the Australian dollar at 1.0450 for a 1.2000 target worked out exactly as I expected as the RBA cut its policy rate, contrary to Street consensus. Sterling has not lost its sizzle yet but Rome was not built in a day and Athens was not built without marble. The September jobs number has boosted risk appetites (strong economy means lower dollar in the surreal world of Wall Street!) and it is hardly possible to get riskier than emerging/frontier market equities (once known as the Third World, now hailed as growth markets!). The Indian rupee is definitely on a roll now that the UPA government has embraced pro-market reforms with a vengeance. Time for 50 INR before reality hits? My faith in Southeast Asian currencies has been vindicated last week. After all, the Philippines peso, Thai baht and South Korean won were all up almost one per cent last week. If Asia is a growth warrant on the US economy, growth in ISM manufacturing/services/payrolls is positive for Asia’s hot money inflows and local debt/FX markets. Notice that the Aussie dollar has been unable to rally even though risk appetite was on fire all week, making it a natural short against both Canada and the Kiwi. If Singapore’s MAS reduces the slope of its currency NEER band to hedge economic/export slowdown risk at its October conclave, the Sing dollar will depreciate against the Thai baht or Malaysian ringgit. However, I believe the MAS will retain its current 2 – 2.5% band, a de facto (default) tightening bias that will boost the Sing against the US dollar. My Christmas wish for 2012? Santa, let me go long Sing at 1.24! The Mexican peso has proved a superlative investment since I highlighted it as a must own currency before the PRI candidate Enrique Pena Nieto won the Presidential election. Since I recommended buying the Mexican peso at 14.5 in May, it has been the world’s best performing currency against the dollar, though I believe we see 12.5 before Christmas. Rising GDP growth, the Hacienda’s stellar public debt metrics, exposure to a US manufacturing renaissance, potential labour market and judicial reforms under the new PBI regime, the prospect of foreign investment in Pemex, above $100 Brent, falling sovereign credit risk and CDS, the stablest banking system in Latin America have all been catalysts for Mexico. The biggest risks this winter? Extreme positioning and the politics of the PRI reform agenda. There are no shortage of event risks that could unnerve the currency markets. Catalonia could opt to secede from Spain in a fiscal revolt (remember 1776?). The German electorate may well reject Frau Merkel’s vision of “mehr Europe” if it means a daisy chain of bailouts. Turkey-Syria and the Iran rial crisis could well escalate into a new supply shock in crude oil. The US fiscal cliff and Chinese politics are both tangible sources of fiscal risk that could well ignite spasms of risk aversion and a dollar rally. Gold at $1800 is an indictment of the Bernanke Fed’s $40 billion per month QE3 (monetary policy will find jobs for jobless steel workers in Pittsburgh or property agents in Florida? Dream on), the trillion dollar Federal budget deficits, the sheer scale of financial repression against savers/creditors and fickle, reactive polarized politics in the White House, Congress and Federal Reserve. Trade ideas? Privatization will be a key Putin III theme and the Kremlin will attract at least $50 billion in offshore capital back to Russia at a time when the 4Q current account surplus could well top $30 billion and inflation risk force Bank Rossiya to turn hawkish. This is a formula for a stronger Russian ruble as high as 29 against the dollar by year end. I believe rising political risk (AKP-military, PKK violence, Syria), a dovish central bank and renewed current account deficit widening means the Turkish lira is toast this autumn. This means the lira alls to 1.95 against the dollar. Macro Ideas - Equities ideas in Jakarta, Seoul and Moscow Indonesia is one of the most exciting high growth economies in Southeast Asia, with successive 6% GDP growth rates due to vast domestic markets and the export of commodities (global leader in palm oil and coal exports). In the past eight years, Indonesian corporate earnings have risen sixfold, far above the ASEAN and Asian rates. Yet Indonesian shares do not trade at a significant valuation premium relative to its ASEAN peers. In fact, Indonesia has been a bit of a Cinderella in Asian equities as investors fear cyclical overheating and a rupiah hit, though inflation is now a mere 4%, one third the pre-crisis 12% CPI rates. The Indonesian rupiah has depreciated thanks to a current account deficit that is now more than 3% GDP. Yet lower inflation, structural reforms, lower government bond yields and a U-turn in the balance of payments could well mean that the Rip Van Winkle bull market in Jakarta reawakens. I await a 10-15% correction to initiate a strategic position in Indonesian equities since corporate EPS growth of 14-15% next year will only be exceeded by South Korea, Taiwan and Thailand. The rupiah is also at risk at current levels, at least down to 9700. I believe the secular investment case in Indonesia is compelling but the entry points in Jakarta equities do not yet exist. Itsy bitsy short on the rupiah as the Asian Halloween trade is the month of trading dangerously. South Korea trades at 9 times earnings and foreign funds have been clear buyer of South Korean techs, financials, chaebol infrastructure. The KOPSI was an buy just below 1900, a level we could well revisit if there is a correction on NASDAQ (a $45 hit on Apple in three sessions? Has it begun?) or if Viva Espana bailouts disappoint the markets or Moodys downgrades the Spanish banking system. EPS growth in EPS is a stellar 16 – 18%. So South Korean shares now trade at 8 times forward earnings and 1.2 times book value, historically a high probability money making level in my experience in Hermit Kingdom. The V KOPSI, the volatility index in Seoul, worries me since it is a mere 12 now, down from 45 in August 2011. Still, I use any spasm of risk aversion in global markets to sell KOPSI index puts as I believe Seoul could deliver a Gangnam Style bull market in EM next year as the KOPSI rises to 2400 while the won appreciates to 1070 against the dollar. Apart from Samsung Electronics below 1.2 million won. I love the Chosun financials, Samsung Life, Hyundai Marine and Fire, Industiral Bank of Korea) as the central bank is on the eve of a historic easing to boost growth. Russia is the cheapest emerging market in the world, thanks to the spectacular valuation derating (with good reason, to be sure!) of Gazprom, Lukoil, Rosneft, Norilsk and VTB. Yet Russia is also one of the most vibrant consumer economies in Europe (not burdened with hundreds of millions of illiterate peasant farmers like China and India), as any observer of the jeunesse-dorée in Moscow and St. Petersburg will attest). Russian GDP growth will actually surprise on the upside (5% in 2013?), the rouble is undervalued, the Kremlin’s public debt is a mere 9% of GDP and the Bank Rossiya has $600 billion in hard currency reserves. Russian valuations never recovered from the twin shocks of the Georgian war and the oligarch debt shocks in 2008 but current valuations at 5 times earnings mean some of EM’s great bargains can be bought at 1996 valuations. Sberbank, Magnit, MTS, Yandex way to go?